Case Study: Operations Management Mcdonald

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Operations Management

McDonald's is a fast food restaurant and one of the world's most successful franchise chains. In spite of recent setbacks, challenging the company to reconsider its role in the marketplace and its brand identity, the company continues to thrive. McDonald's has restaurants in 6 continents and well over one hundred countries. Perhaps the greatest key to the success of the McDonald's model is Operations Management. Operations management has been a cornerstone for the success of the company because it informs the details in everyday operations, leading to the delivery of products to the customer. Ultimately, McDonald's is a service- and customer-oriented business that uses strategic operations management to manage expenses, retain customer loyalty, and create a consistent brand. Its delivery system is finely honed, and has been for many years. Even when McDonald's introduces new products to its stores, the delivery system remains the same. Likewise, recent changes to branding, advertising, and other marketing decisions have had little appreciable impact on actual store operations.

The strategic organization of issues like supply chain, production management, and staffing decisions is critical to the success of large-scale operations like McDonald's. The result of effective operations management is a smooth and efficient operation, core components of the fast food experience worldwide. Operations management is always a core "organization-wide activity rather than the prerogative of one department only," (Brown, Bessant & Lamming, 2013, p. 6). In the case of McDonald's, operations management at the organizational level ensures a level of standardization that is part of the restaurant's brand identity. From corporate headquarters to the smallest store in the smallest country, McDonald's operations management is dedicated to efficiency, consistency, and cost-effectiveness. McDonald's managers also make sure that operations are designed to meet the company's motto, which is Quality, Service, Cleanliness, and Value.

Customers appreciate the predictability of McDonald's restaurants, and the comfort in knowing that a McDonald's consumer experience will be standardized at any franchise around the world. Likewise, customers appreciate the speed at which orders are processed, which also requires sound operations management. Even when store managers add new items on the menu for local markets, the overall organizational package remains the same. These two core issues: predictability and speed are what underwrite the McDonald's operations management decisions.

Operations management at McDonald's is exemplified in the methodical ways employees work to ensure that food is prepared and delivered to the customer in a timely and efficient manner. The "quality" component of the McDonald's motto is also addressed through food delivery and processing practices. McDonald's employees have a specific procedure for processing orders at the cashier tills, including at the drive-through tills. Following these specific procedures, which have been logically calculated to ensure that hot food stays hot, means that customers stay happy and employees can work robotically and methodically. There are individualized decisions that store managers or personnel may take in situations in which orders are large and require extra processing time, or if the customer is disabled or elderly and might need help carrying orders to the table.

When monitoring the timeliness and efficiency of order processing at McDonald's restaurants, regional supervisors might test their restaurants with a stopwatch (p. 294). The customer is not supposed to have to wait in line for more than two minutes, and the order should be fulfilled in a minute or less. Deviation from these strict times would require intervention or employee training. Both quality and service components of the company motto are addressed with the timing of the order processing. Customers come to McDonald's for a fast food meal, and expect timely delivery of products and little wait times even at peak hours. Likewise, customers expect food to be prepared as fresh as possible.

Schedule managers, such as the restaurant manager or the first assistant manager, create a daily projected sales chart. This chart is based on sales from the previous three weeks as well as from the same period of time the previous year (p. 295). Armed with the daily projected sales chart, the manager knows how to manage the production area. Bins would need to be stocked more on days that are projected to be busy; whereas the production should be slower if the projected sales will be lower. The production managers can usually handle a small or unpredicted surge in customers on the fly. Likewise, projected sales will inform the number of crewmembers working on any given day. Volume and demand can change rapidly at a McDonald's restaurant, with peak times being lunchtime and weekends. Staffing is one of the key components of effective operations management. Quality, service, cleanliness, and value are all ensured via effective staff management. Staff are required to participate in every aspect of restaurant management including cleaning, food preparation, and interaction with customers. The value component is more closely linked to pricing decisions made at corporate headquarters. From the company's point-of-view, sales techniques like upselling or suggestive selling do help the customer feel the value of the food is good and also help the store make money.

Managing the bin area is critical in any McDonald's restaurant. In many ways, the bin is the heart of operations management. During critical moments, a staff member is assigned to the bin area to ensure that production levels are appropriate for the customer demand. Too many items, and food might need to be thrown away. This is because food not sold after seven minutes of being wrapped is generally tossed away (p. 295). Some managers prefer to err on the side of overproduction so that customers are happy with the speed of food delivery. Other managers might opt for a lower bin stock, so that customers always receive the hottest and freshest food possible. Thus, store managers have some leeway in their restaurant-specific operations management.

In any given McDonald's restaurant, the manager will use checklists for preparing each item of food. The checklists are part of employee training protocols, and ensure that production is as fast and efficient as possible. Checklists also ensure consistent quality of items. For example, the frozen fries must be defrosted for forty-five minutes before being fried, and the fry times are timed. Big Mac assembly has a strict procedure that must be followed, much as an assembly line. Teamwork is built into the McDonald's operations management model because of the fact that people from different stations must work together to deliver products to the customer.

The McDonald's corporate motto is Quality, Service, Cleanliness, and Value (QSC&V). Operations management decisions must substantiate McDonald's commitments. Quality is ensured via regular auditing of stores. Periodically, managers travel to other McDonald's restaurants for an external audit. This is one of the ways corporate headquarters monitors individual franchises. Headquarters also carries out annual audits, and these are more extensive involving both day and night shifts observation.

With stores in 122 countries on 6 continents, McDonald's has the market cornered. However, there is still competition in local markets. One of the ways McDonald's has responded to consumer demands is by making sure bins are not overstocked and food is fresher. Computers and temperature controlled "launching zones" have become standard operating procedure in many McDonald's restaurants to bring a hotter, fresher product to the customer. McDonald's has responded to challenges and changes in the marketplace by altering its approach, buying and then divesting itself from other restaurant chains, and also by introducing a "healthy" line of foods that consumers have access to as alternative menu items.

In 2002, McDonald's admitted its first-ever quarterly loss. This news came after the company decided to diversify and enter different restaurant markets with chains like Chipotle Mexican Grill and Pret a Manger. McDonald's was forced to shut down some of its restaurants. Responding rapidly to the crisis, corporate headquarters responded with an aggressive marketing campaign and a "back to basics" approach that eventually divested the company of its investments in other brands like Chipotle Grill and Pret a Manger. At the same time, McDonald's decided that it would emphasize better quality coffee drinks by purchasing espresso machines for some stores, and also offering customers free WiFi. These initiatives added value and lured customers to McDonald's outlets. Operations management issues remained mainly the same, including the core components of standardization and staffing. With espresso machines, staff needed to be re-trained in terms of timing the production of coffee to fulfill the strict standards of order fulfillment. However, the instruction of wraps, smoothies, and other alternative menu items did not require significant shifts in operations management. A checklist for preparation and serving accompanies each item on a McDonald's menu. This is true for traditional items like Big Macs and also for new items.

The McDonald's delivery system meets the company's business needs precisely. Everything in McDonald's operations is timed or measured to each drop. This is why inventory management is relatively easy in a McDonald's, and why cost controls are also simple and straightforward. By measuring every drop of ketchup, the restaurant managers can calculate profits to the cent.… [END OF PREVIEW]

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